WHERE BOOMERS WANT TO NEST THE REST OF THEIR LIVES
9/21/2006
Will they opt for the stereotypical post-retirement golf course communities so popular in the 1980s and '90s? Will they head for new beach and ski resort real estate developments? Or will they downsize and move to a center city condo to maximize use of cultural attractions and avoid long commutes?
With more than 70 million Boomers heading down the demographic conveyor belt toward retirement -- and the oldest of them hitting 60 this year -- no wonder these questions were prominent at the National Association of Home Builders' annual conference here Jan. 11-14.
Although consumer survey research has shown for decades that homeowners in their 40s and 50s often have no detailed plans to downsize or sell their houses, a new statistical study unveiled at the convention suggests that the Boomers might have different ideas.
In the study, more than 50 percent of all homeowners aged 45 to 54, and nearly 60 percent of homeowners aged 55 to 64, rated themselves either "likely" or "very likely" to buy a vacation, investment or new primary home sometime in the coming 60 months. Roughly 49 percent of owners 55 years and older say they are likely to move into some form of "active adult" community.
One out of 5 Boomer households say they are thinking about moving to an age-restricted adult community -- a figure more than double what a similar study found just five years ago.
The new research, conducted by ProMatura Group LLC, an Oxford, Miss., consulting group, was a statistical sample of 2,309 Boomers polled Nov. 28-30. The study was limited to households with Internet connections and has a 1.8 percent margin of error.
Margaret Wylde, president and CEO of ProMatura and a longtime expert on the behavioral dynamics of aging, told the builders that Boomers' attitudes on housing and location may be significantly different from that of their immediate predecessors. They are seriously willing to consider moving to planned communities that emphasize "active lifestyles," fitness and social interactions.
But their desires for physical pursuits aren't necessarily what real estate developers might assume. For example, though golf-related second home and "active adult" communities were all the rage in recent decades, Boomers may not be willing to sink their retirement housing capital into golf links.
Just 1.7 percent of homeowners 55 years and older said they were likely to purchase a home on a golf course, and just 5 percent said they wanted a view of a golf course.
Contrast that with 25.5 percent of the same group that said they want to end up living on -- or with a view of -- a fresh waterfront of some sort, such as a lake or river.
Boomers also may not be as eager as some developers assume to buy property on or close to salt water -- perhaps in part because of concerns about potential future storm damage. Just 1.7 percent consider themselves highly likely to buy oceanfront, and just 6.8 percent want to buy property with a saltwater view.
Contrast those numbers with the biggest draw among Boomers when it comes to views: non-golf-related "green space," such as parklands or common area green strips built into many modern planned communities. Boomers want to see trees, grass and fresh water -- minus whizzing golf balls -- out of their windows.
Active Boomers put a high emphasis on the presence of well-equipped fitness centers nearby. Nearly one-quarter of all Boomer homeowners 55 years and older want to live within walking distance of a fitness center or health club -- a priority that is more than double the level of interest of homeowners in general.
With all this high energy, they apparently plan to load up on fuel through fine dining. Whereas just 3.2 percent of homeowners of all ages want to live within walking distance of "fine restaurants," more than four times as many Boomers 55 years and older consider that a key feature of their ideal future community environment.
Boomers are emphatic about bedrooms -- the magic number is three -- but don't seem to mind if their total living space, whether in condo or detached single-family form, is smaller than their longtime family homes. Sixty-two percent say they'd be happy with less square footage, as long as "everything is top quality" in the new place.
The boomers are loaded with real estate equity, and they apparently want to sail into retirement with high-end kitchens, bathrooms, spas, entertainment centers and you name it. And Boomers, as everybody knows, are used to getting what they want.
Email Kenneth Harney at kenharney@earthlink.com
If you have a question you’d like to have answered in this blog, please email me at dsaccomcatee@gmail.com
WINE COUNTRY MOVES NORTH
7/20/2006
Wine country moves north
Affordable land and unique soils lure vintners to Lake County
The reality of Lake County is not its Clear Lake trailer parks -- or even its bass fishing, country music or nude hot springs. Ask any geologist: Lake County is a playground for anyone who likes seriously unusual dirt.
Geologists plan trips to Lake County just to look at the soil. The volcanic cones and diamonds in the landscape are a result of millions of years of environmental history. And now winemakers and viticulturists are beating a path through the rocky soil to plant vineyards and build wineries.
Despite a long history of growing grapes, Lake County's modern wine industry is still in its infancy, with only 14 wineries -- 11 with tasting rooms. A mere five years ago, there were only four wineries. Industry giant Kendall-Jackson started its business here in 1982 with the persevering talent of Jed Steele, the winemaker who helped create Kendall-Jackson's successful style of Chardonnay. Steele left Kendall-Jackson to make his own wine in 1991 and opened his Kelseyville winery in 1996. Now, the iconoclastic Steele's winery is the unofficial first stop for new arrivals looking to make stellar wine in the county.
Other major forces in the industry, such as Robert Mondavi Winery, Foster's Wine Estates and Stag's Leap Wine Cellars's Hawk Crest Wines, also buy Lake County grapes.
There are many reasons for the viticultural region's sudden growth, not the least of which is the surprisingly successful adaptation of some varietals to mountain terrain. Cabernet Sauvignon, a tough grape, thrives on the red volcanic slopes, and Petite Sirah, a powerful tannic red wine grape with a growing fan base, also shows promise. Sauvignon Blanc is moving from the fertile alluvial valley on the south side of Clear Lake to less fertile locations upslope to capture minerals and produce lower yields.
This new lease on life for Lake County grapes and wines came about, as many changes do, in response to a crisis.
Starting in the mid-1990s, just as Napa County vineyard real estate was beginning to soar, the market for bulk grapes produced by Lake County growers began to slide. This put vineyards, as well as orchards from an equally weak Bartlett pear market, on the real estate block. With acreage selling for 10 percent of the price of similar land in Napa Valley, Lake County land was a bargain for vineyard hunters.
Andy Beckstoffer, the largest vineyard landowner in Napa County, bought 2,000 acres near Kelseyville -- in what is now the Red Hills Lake County appellation -- beginning in 1997. Since then, land purchases and vineyard development, both large and small, have continued at breakneck speed.
As new vineyards began to produce high-quality grapes, wineries opened. And with bottles often selling for as little as $14, Lake County's wines are bargains compared with similarly rated wines from Napa Valley and Sonoma County.
North of Napa County and east of Sonoma and Mendocino counties, Lake County's 8,500 acres of vineyard border three of California's most influential viticultural regions. In the early 1900s, Lake County had more than 7,000 acres of grapes and 36 wineries, more than Napa and Sonoma counties combined.
But during Prohibition, vines were replaced with walnuts and pears. From the 1950s on, Lake County vineyards grew large volumes of grapes that were sold to wineries from other regions, often for a "California" blend. "Lake County" never appeared on the label.
Paul Skinner, owner of vineyard development company Terra Spase, says he is amazed at Lake County's potential. The developer admits that creating a vineyard in Lake County's demanding landscape, high altitudes and virgin land can be tough. For example, at 2,300 to 2,600 feet, the land that became Obsidian Ridge Vineyard was so filled with rock that tractor blades broke as co-owner and vineyard manager Peter Molnar cleared two tons of obsidian, a volcanic glass-like black rock that is hard enough to make surgical tools.
Skinner, who performs elaborate soil analyses, says the key to producing grapes for great wine, particularly in Lake County, is to find what growers call the "sweet spots."
It's not Napa
"The home run for us in Lake County is not to be Napa, but to be able to produce wines that are unique," said John Adriance, COO for Snows Lake Vineyard, a custom producer that sells its grapes to various wineries. In January 2007, Snows Lake will release its first two wines.
Geologists say that volcanic upheavals dating back several million years (the last was 10,000 years ago) created Clear Lake, the oldest natural lake in North America. The volcanoes and earthquake fault lines also produced the world's largest geothermal mass of hot springs, on the Sonoma-Lake county border.
All this natural plumbing juts through a field of lava up to 15 miles deep to the calcium- and potassium-rich red-iron volcanic surface. The result is unusually porous, grape-loving dirt.
Clay and Margarita Shannon of Shannon Ridge Vineyards own some of the most mountainous vineyards in High Valley, located on the northeast side of Clear Lake, at altitudes that approach 3,000 feet. They sell Sauvignon Blanc, Cabernet Sauvignon, Petite Sirah, Cabernet Franc, Syrah and Zinfandel grapes to other producers looking to add mountain character to their wines. The Shannons released their first wine under their own label in 2004, after years of managing vineyards in the Napa and Sacramento valleys.
Clay Shannon says Lake County's reputation for selling bulk wine held it back -- until an economic crisis pushed it forward.
"Mondavi, K-J (Kendall-Jackson) and Beringer reduced their grape contracts, and that made us a region," he says.
Growers were left with the high-volume, bulk wine grapes and diminishing sales revenues, particularly as Napa and Sonoma vineyards returned to production after recovering from the phylloxera insect that ravaged vineyards in the early to mid-1990s.
Shannon said the Lake County growers took a look at their farming options, sought out winemakers looking for a challenge and started to make their own wines. And so Lake County as a wine region was born. "Otherwise," says Shannon, "we'd have just continued to be a North Coast blend, supplying grapes."
Land available
When Kaj Ahlmann wanted to invest in vineyards, the Dane initially looked in Napa County, where vineyards are small and price tags are large. On a whim, Ahlmann jumped the county line to Lake County and found 4,300 acres of land that looks into Napa Valley's eastern vineyards from his Six Sigma Ranch and Vineyard, near the southeast side of the lake.
There is so much land, and so few jobs in Lake County, that the county is doing what it can to bolster this sudden interest from visitors attracted by the area's wines.
The Lake County Board of Supervisors is promoting agritourism with approval for tasting rooms, inns, bed-and-breakfasts, restaurants and spas.
The concept is not to be like Napa Valley, with its upscale tasting rooms positioned cheek by jowl along Highway 29 and the Silverado Trail. After all, Lake County has only nine stoplights. The biggest project, already well under way, is from Jim Fetzer, whose family was instrumental in the development of Mendocino County's wine industry. Fetzer's Ceago Vinegarden is on Clear Lake's north shore, near Nice.
"As far as I know, this is the only winery in the country where you can boat up and go tasting," says Fetzer, whose vineyards, olive groves, gardens and vegetable plots are farmed biodynamically. (Biodynamic farming is an organic and holistic approach to maintaining plants in tune with cycles of the sun, moon and seasons.)
Fetzer's $150 million development will be a shoreline resort centered on food and wine. A tasting room, winery, gardens and boat dock are already open, and a restaurant, spa and cottages are also under construction. A hotel and condominiums are also planned to be amid the vineyards.
Not everyone is going the mega-tourism route. Karen and Michael Noggle left Napa Valley for a 6-acre vineyard near the village of Clearlake Oaks. Michael Noggle had a lot of experience as a vineyard developer and had been an avid home winemaker for years.
This year, the Noggles have developed their Cabernet Sauvignon vineyard, opened a small winery with weekend tastings and bottled their first vintage, a powerful 2003 Lake County Cabernet Sauvignon.
"We will never be big; we're boutique. But we are working hard and the wines are doing well," says Michael Noggle, whose Noggle Vineyards and Winery wine is available through direct sales and beginning to appear on restaurant lists.
Crest of the wave
An early arrival in Lake County's new wave of wineries is Jacqueline Dharmapalan's Monte Lago Vineyards and Winery. Dharmapalan bought a 500-acre property on the crest of the mountain ridge between Clear Lake and High Valley in 1995. The winery's 2000 release was the winery's -- and the High Valley appellation's -- first wine. Cabernet Sauvignon, Cabernet Franc, Petite Sirah and Syrah are among the red varietals for her estate-grown, single-vineyard wines.
Shannon, who maintains vineyards for Monte Lago, said, "The Napa Valley recipe just doesn't work up here." Napa Valley's largely flat land has fertile and easy-to-maintain vineyards of primarily Cabernet Sauvignon. "The climate (in Lake County) is extremely dry and the volcanic soils hold no water. The heat is of the warmer-climate grape-growing world -- Tempranillo, Barbera and Petite Sirah. We will hang our hat on (the Petite Sirah) variety."
Midday temperatures can top 100 degrees in the summer, yet at night drop by 40 to 70 degrees, starting with afternoon winds from the lake and from an unusual east-west wind that traverses High Valley. This extreme swing in temperatures lengthens the ripening period, resulting in enhanced flavors in the grapes.
As viticultural regions around the world begin to heat up because of climate change, their night temperatures are at risk of becoming too warm for optimum grape-growing, according to studies by the International Panel on Climate Change. As a result, mountain vineyards around the world, like in Lake County, are becoming hot commodities.
Jerry Brassfield is no newcomer to Lake County. He bought the Brassfield Estate ranch 30 years ago, way up from the lake in High Valley. Back then it was a family refuge and cattle ranch. In the late 1990s, Brassfield, a former owner of Felton Empire winery, in Felton in Santa Cruz County, decided to go with wine grapes. He built a winery and has plans for caves, a tasting room, luxury accommodations and a restaurant.
Ahlmann is taking a more wildland approach with Six Sigma. Vineyard plantings are essentially islands on the vast ranch. He has dedicated a portion of the land to a conservancy trust for hiking and the preservation of fauna and flora and will feature docent-led geology and history tours. Ahlmann's vineyards, like most other large ranches in Lake County, are designed with wildlife corridors, so paths for deer, boar, elk, bears and the occasional mountain lion aren't blocked by vineyard trellises. The Six Sigma vines are young, and the winery is a work in progress, with expanded caves and a tasting room under construction. Accommodations are also under way. Though he has no plans for a restaurant, he hopes the increased interest will draw more sophisticated eating possibilities to the area.
Land with potential
In Guenoc Valley, on the Napa-Lake counties' border, Lillie Langtry Estate and Vineyards president Roy Cecchetti, a former owner of negociant Cecchetti-Sebastiani Cellar's, says the potential for great Lake County wines was always there. The winery has been producing wines for 25 years under the Guenoc label. This winery, too, is undergoing changes, with new management, new vineyards and a new focus on Petite Sirah and Sauvignon Blanc.
But just because wine grape intelligentsia -- the mountain vineyard pioneers such as Shannon, the long-term wine investors and creators led by Steele, and, increasingly, businessmen like Beckstoffer, Ahlmann and Brassfield -- is discovering Lake County, is the region's wine worth it? The trouble it takes to create vineyards in such difficult terrain and creating wine from lesser-known grape varieties, such as Petite Sirah, Mourvedre, Viognier, Tempranillo, only means something if consumers like the taste.
"Fine wine is real for the first time in Lake County. In the past, Lake County's impression was it was cheap or part of a blend," says Dennis Kreps, who buys his Lake County grapes from Shannon for the Two Angels brand. "Now it's varietal discovery time."
Snows Lake Vineyard's Adriance adds, "The use of these 'new' grapes in quality wines will ultimately determine our long-term success as a wine-growing region."
What's Where in Lake County
As Lake County's wine identity develops, so does the desire to create distinct American Viticultural Areas (AVAs) based on each region's geography and geology, weather, and history. Here are snapshots of the AVAs, or appellations, for grapes from Lake County. Use this as a cheat sheet for touring the region.
On July 29 and 30, more than a dozen wineries will be open to the public for the Second Annual Wine Adventure Weekend. For more information, go to www.lakecountywinetours.com.
North Coast: With 3 million acres, North Coast is the second-largest AVA in California, created in 1983, and includes vineyards in Lake, Napa, Sonoma, Mendocino, Marin and Solano counties.
Lake County: This designation appears on labels to identify the grapes' origin but is not an AVA. There is talk of making it an appellation, but until then, it is largely used as a synonym for the Clear Lake appellation.
Clear Lake: The 13th largest AVA in California, Clear Lake surrounds California's largest natural lake. Within its 168,960 acres are the Red Hills Lake County AVA, most of the High Valley appellation, and Big Valley, a 31-square-mile area (not an AVA) where much of the county's bulk wine is grown. The Clear Lake appellation was created in 1984 when grapes were grown solely to supplement blends for wineries outside the county, a practice that continues today.
Benmore Valley: The smallest appellation in Lake County, Benmore Valley is located in a mountain dip on the Lake-Mendocino county line, north of the Hopland Grade. The 300 acres of vines in the 1,440-acre AVA supply Geyser Peak Winery.
Guenoc Valley: The nation's first one-owner AVA was created in 1981. Hawaii's Malulani Investments acquired the property in 1963, built a winery and planted vineyards.
High Valley: Lake County's newest AVA, High Valley has the first cluster of consumer-friendly wineries in a single area. Vineyards within the 14,000-acre AVA range from 1,600 to more than 3,000 feet altitude in a volcanic mountain-rimmed bowl. Cabernet Sauvignon, Syrah, Zinfandel, Merlot, Petite Sirah and Tempranillo vineyards are planted on ridges of brick-red volcanic cinders and pumice-like gravel. Cooler-weather varieties including Sauvignon Blanc, Pinot Grigio and Pinot Noir are also planted in the valley. An unusual east-west traverse wind combined with cool winds sweeping up from Clear Lake means temperatures in High Valley can swing 50 to 70 degrees in a single July or August day.
Red Hills Lake County: This appellation, created in 2004, is red grape country. The name includes Lake County to distinguish it from a Red Hills area in Oregon. Ninety percent of the vineyards of this 31,250-acre AVA are planted on shockingly red volcanic rocks and dust. The AVA blankets the foothills of 4,300-foot Mount Konocti. About 3,000 acres are planted, most since 1999. Cabernet Sauvignon is by far the primary grape with small plots of Petite Sirah, Zinfandel, Cabernet Franc, Sangiovese and other reds.
-- Kathleen Buckley
A Taste of Lake County
A two-day tasting of 82 white and red wines made it clear that Sauvignon Blanc reigns in the white category. Location is everything for the reds; several varietals shine.
White and rosé wines
2005 Ceago Vinegarden Clear Lake Del Lago Syrah Rosé ($18) A delicate, superfresh rosé from Jim Fetzer's new lakeside biodynamic vineyards. Light, crisp raspberry fruit flavors and a lovely salmon color. There's acidity, balanced with a poised, soft aftertaste.
2005 Gregory Graham Rolling Knolls Vineyard Red Hills Lake County Sauvignon Blanc ($16) From Graham's new winery, this is on the crisp and herbaceous side of the Sauvignon Blanc flavor spectrum. That makes it a food-friendly wine, with its grapefruit and citrus taste.
2005 Guenoc Lake County Sauvignon Blanc ($12) A fine, fresh, typically herbaceous wine from Langtry Estate and Vineyards (formerly Guenoc). With a light touch from winemaker Bob Broman, the wine folds acidity into grapefruit and green plum flavors. Just to fill it out, there is light creaminess that goes down well.
2003 Monte Lago Vineyards and Winery Clear Lake Sauvignon Blanc ($13) This is one of the few Lake County wood-aged Sauvignon Blancs, from Jacqueline Dharmapalan's spectacularly positioned mountain estate in High Valley. It's toasty and full bodied, with almond paste and crisp green flavors to finish.
2005 Six Sigma Ranch and Vineyards Rooster Vineyards Lake County Sauvignon Blanc ($20) Kaj Ahlmann's second vintage from his remote southeast Lake County ranch is Loire-like in style. The consulting winemaker is Denis Malbec, ex-cellar master of Bordeaux's Chateau Latour. With its grassy aroma, mineral character, flavors of white grapefruit and lime, and brisk acidity, this hits the spot.
2005 Two Angels High Valley Sauvignon Blanc ($17) A deliciously green, fresh, crisp wine, made from grapes from the High Valley vineyards of Clay Shannon. It's light, with a grapefruit and mineral taste.
Red wines
2003 Brassfield Estate Monte Sereno Vineyard High Valley Cabernet Sauvignon ($40) A powerfully concentrated wine drawn from the elegant intensity of the dry black currant flavors, the perfumed violets, the dry tannins, and the complex layer of wood tastes. The result: a wine that demands a fine meal.
2002 Guenoc Lake County Petite Sirah ($18) A signature wine for Guenoc, this is juicy, ripe and fruity, with spice, pepper and red berry flavors.
2004 Obsidian Ridge Red Hills Lake County Cabernet Sauvignon ($25) At 3,000 feet, the Molnar family's obsidian vineyard is a contender for the highest vineyard in Lake County. A delicious, minerally, perfumed, spicy wine that is packed with soft, ripe, black berry fruits. Great acidity gives it all shape.
2004 Rosenblum Cellars Snows Lake Vineyard Red Hills Lake County Zinfandel ($35) With intense fruit from the Snows Lake Vineyard, it may be high in alcohol (at 15.5 percent), but thanks to the Rosenblum Cellars touch, it doesn't taste like it. The balance is the key: deliciously ripe fruit, concentrated black fruit flavors, layers of herbs and tannins.
2004 Steele Wines Writer's Block Lake County Cabernet Franc ($14) What a bargain price for this impressively perfumed wine (83 percent Cabernet Franc, 3 percent Syrah, 14 percent Merlot). It has raisin, fruitcake and herbal flavors that partner with the ripe blueberry. To finish, dry tannins bind it all together.
-- Kathleen Buckley
Kathleen Buckley is a freelance wine writer who divides her time between Napa and Bordeaux. E-mail her at wine@sfchronicle.com.
If you have a question you’d like to have answered in this blog, please email me at dsaccomcatee@gmail.com
INTERNAL REVENUE CODE SECTION 1031: TAX DEFERRED E
6/22/2006
Section 1031 (like-kind exchanges) offer the opportunity to exchange one property for another, and defer (not currently pay tax on) the gain until the new property is later disposed of in a taxable transaction. In addition, there is no limit to the number of times a taxpayer can take advantage of Section 1031 exchanges. Brokers and parties to transactions can use Section 1031 exchanges to their creative advantage when a party would not be willing to sell in a taxable transaction, or when buyers are cash poor but have other business or investment property, or will have no capital gains tax currently due because of Section 1031.
Section 1031 exchanges have been referred to by a variety of names such as: Starker exchanges, like-kind exchanges, delayed exchanges, non-simultaneous exchanges, and tax deferred exchanges. They all basically refer to the same thing, i.e., that tax on any gain can be deferred through an exchange until a future taxable event occurs.
Tax considerations that the taxpayer should consider when determining whether to execute a Section 1031 exchange include the following: (1) in an exchange, the basis of the new property is reduced by the amount of gain which has been deferred; (2) Section 1031 "defers" tax on gain until a future point, but generally does not avoid it; and (3) in some circumstances, it may be better to "Sell" the property, pay the tax, "reinvest" the proceeds, and get a higher basis with more depreciation as opposed to exchanging under Section 1031.
The following legal memorandum is intended as an introduction to this dynamic area of real estate brokerage practice. Individuals who are contemplating an exchange should first consult appropriate professionals who are experienced in the tax and financial aspects of Section 1031 exchanges.
Q 1. What does Internal Revenue Code Section 1031 say?
A Section 1031 says that when property is "exchanged" for other property that is "like kind," some or all of the gain which is "realized" (received) may not be "recognized" (taxed currently). For example, if a taxpayer exchanges one income or business property which has an adjusted basis of $50,000 and a value of $100,000, for another qualified like-kind property valued at $100,000, s/he has "realized" a gain of $50,000, but it would "not" be currently recognized as taxable, due to the provisions of Section 1031.
Note that Section 1031 cannot be used for property that is personal use property, such as a principal residence. Section 1031 says that no gain or loss is currently recognized if business or investment property is exchanged for other like-kind property which will be held for use in a trade or business, as an investment, or for production of income.
If an exchange is made for property that is both like-kind and not like-kind, as where an apartment building is exchanged for a fleet of trucks and an office building, then some of the gain will be recognized (taxable) by the Internal Revenue Service (IRS). (The trucks are personal property, unlike the apartment building and the office building which are both real property.) In general, all real property will be considered like-kind with all other real property, as long as both parcels are
Q 2. What is the exact wording of Internal Revenue Code Section 1031?
A "Sec. 1031 [1986 Code]. (a) Nonrecognition of gain or loss from exchanges solely in kind.
1. In general - No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like-kind which is to be held either for productive use in a trade or business or for investment.
2. Exception - This subsection shall not apply to any exchange of
(A) Stock in trade or other property held primarily for sale, . . .
(D) Interests in a partnership . . .
3. Requirement that property be identified and that exchange be completed not more than 180 days after transfer of exchanged property: For purposes of this subsection, any property received by the taxpayer shall be treated as property which is not like-kind property if
(A) such property is not identified as property to be received in the exchange on or before the day which is 45 days after the date on which the taxpayer transfers the property relinquished in the exchange, or
(B) such property is received after the earlier of
(i) the day which is 180 days after the date on which the taxpayer transfers the property relinquished in the exchange, or
(ii) the due date (determined with regard to extension) for the transferor's return of the tax imposed by this chapter for the taxable year in which the transfer of the relinquished property occurs . . ."
In other words, the following requirements must be met in order for the property to qualify for Section 1031 non-recognition treatment:
- The properties, both transferred (the downleg) and received (the upleg) must be like-kind (for example, both must be real property);
- both properties must be held for use in a trade or business or for investment and not primarily for sale;
- both must be tangible (real or personal) property;
- it must be an exchange, not a sale and reinvestment;
- the taxpayer must demonstrate an intent to exchange; and
- if the exchange is not simultaneous, the taxpayer must meet certain time frames for identifying the upleg property and closing escrow. These time frames will be strictly enforced. (See Question 3.)
It is also important that the taxpayer does not have constructive or actual receipt of money, cash equivalent, or any non-qualifying property or have the unrestricted right to direct the escrow proceeds. This warning also extends to the taxpayer's agent. For this reason, some sort of "qualified intermediary" should be used to act on behalf of the exchangor in a delayed exchange. There are strict rules as to identification and receipt of property. (See Question 4 for rules as to identification of the upleg property.) If the various rules are not properly followed, the whole transaction could become currently taxable.
Q 3. What are the time frames for a "delayed" (non-simultaneous) Section 1031 exchange?
A After disposing of the downleg property, the taxpayer must:
1. "Identify" the upleg property within 45 calendar days of the transfer of the downleg property. (See Question 4.)
2. Acquire (close escrow on) the upleg property no later than the earlier of:
a. 180 calendar days after the downleg property is transferred, or
b. the due date (determined with regard to extension) of the tax return for the year in which the downleg was transferred away.
Q 4. What must a taxpayer do to "identify" the upleg within the 45 day period?
A A taxpayer must clearly identify in writing the property to be acquired. The identified property must be unambiguously described. Generally, a street address or legal description will suffice.
Under Treasury Regulations section 1.1031(k)-1 a maximum of three target properties without regard to their fari market values lmay be "identified." (If any becomes unacceptable, a Notice of Revocation is needed.) If more than three properties are desired to be identified, this is allowed if their combined fair market value at the end of the 45 day period doesn't exceed 200 percent of the total fair market value of the downleg properties. If you exceeded 200 percent, the exchange may be deemed fully taxable, subject to the rules affecting property already received before the end of the 45 days .
There are additional rules under the regulations that deal with the number of properties a taxpayer may identify that will not be covered here but that should be referred to before executing a Section 1031 transaction.
Q 5. Can a taxpayer utilize Section 1031 when dealing with an owner-occupied residence?
A No. However, individuals sometimes exchange one rental property for another planning to move into the acquired property and, after living in it for two years, sell it and take advantage of the capital gains exclusion of $250,000 for individuals and $500,000 for married couples filing joint returns. This had sometimes occurred as soon as three or four years after the acquisition. As of October 22, 2004, this will no longer be possible. Pursuant to the American Jobs Creation Act (signed by President Bush on October 22, 2004), a property acquired in a 1031 exchange and later converted to a principal residence must be owned for five years from the date of the exchange before the owner can claim the capital gains exclusion. So, in order to take advantage of a 1031 exchange and the capital gains exclusion, the owner must both have used it as a principal residence for two years and owned it for five years.
Q 6. Is it possible for a taxpayer to avoid ever paying tax on the gain deferred in a Section 1031 exchange?
A Yes. Since there is no limit to the number of Section 1031 exchanges that a taxpayer can be involved in, a taxpayer can continue to defer the taxes due by either holding on to the property or by further exchanging it with other like-kind property until the taxpayer dies. When a taxpayer dies without having sold or transferred the property in a taxable transaction, his/her estate will not have to pay income tax on the deferred gain. The basis will be "stepped up" to its market value at the taxpayer's date of death. As a result, when the estate or heirs later sell the property, they will only pay tax on the increase in value after the original taxpayer's death.
Q 7. Can personal (non-real estate) property be exchanged for other personal property in a Section 1031 exchange?
A Yes. Personal property can be exchanged for other like-kind (personal) property. (See Question 11.)
Q 8. Can a partnership interest be exchanged in a Section 1031 exchange?
A Generally not. The non-recognition of gain or loss rules do not apply to transfers of most partnership interests. However, a partnership which owns property can exchange the property for other like-kind property in a Section 1031 exchange. Exchanges involving a partnership are very technical and complex. Parties interested in this area should consult a certified public accountant (CPA) or tax lawyer experienced in this specialized field.
Q 9. Is there a particular way that a Section 1031 exchange must be structured?
A No, an exchange can be structured in a number of ways. However, first and foremost, a Section 1031 exchange should be structured by someone who has expertise in this area. The exact structuring of an exchange depends on whether the exchange will be simultaneous or delayed, the business practices of the accommodator, (if any), the preferences of the parties' CPA, attorney, or other tax advisor, and other factors. Structuring an exchange can be complex and should be done only by someone experienced in the tax and financial aspects of Section 1031 exchanges.
Q 10. To be eligible for a totally tax deferred exchange, must a taxpayer trade up in equity as well as trade up in fair market value?
A Yes. The fair market value of the upleg property must be equal to or greater than the fair market value of the down leg property to avoid paying tax on any gain. In addition, a taxpayer must receive equity in the upleg property equal to or greater than the equity given up on the down leg property to avoid any taxable "boot." Therefore, in an exchange, it is the equities of the two properties that are exchanged. The equity is the property market value minus any mortgages, liens or any other encumbrances.
Finding two properties with equal equity is rare. It is possible for one party with greater equity to, for example, take on an additional mortgage in order to make the equities equal. Also, along with the exchange of the properties, one party can give the other notes, cash, a car or other personal property to balance out the equities.
In general, a taxpayer should consider exchanging into a property with a higher market value and a higher mortgage than the downleg to avoid paying taxes on any gain. (See Question 12.)
Q 11. What is meant by a "like-kind" exchange?
A Both the property transferred (downleg) and the property acquired (upleg) must be like-kind. This means that real property may be exchanged for other real property, or personal property may be exchanged for other personal property. For real property, any property that is considered real property under State law will qualify for an exchange for other real property, as long as the other requirements are met. (See Question 2.) For example, an apartment house may be exchanged for raw land that will be held for investment, or a single family residential property that has been held for rental may be exchanged for a shopping center, or any similar combination.
Q 12. What is "boot"?
A If the taxpayer receives some cash or property in an exchange that does not qualify for Section 1031 non-recognition of gain treatment, the non-qualifying portion (unlike property) is called "boot" and will be subject to tax based on the fair market value of the unlike property. Generally, there are three different kinds of unlike property. These are:
1. cash;
2. other unlike or non-qualifying property, which may either be real or personal property (such as a house that the exchangor will occupy as a personal residence); and
3. net mortgage or loan relief.
The mortgage debt of the downleg property is considered unlike property and is subject to tax. However, if the upleg is also subject to a mortgage, the amount which is subject to tax is determined by the net mortgage relief. The unlike property will be the balance of the downleg mortgage in excess of the balance of the upleg mortgage. This rule will apply whether the property is acquired subject to or with an assumption of a mortgage, or with a new mortgage. (See Question 10.)
There can be situations in which a taxpayer has net mortgage relief but also pays cash. In that case, the net mortgage relief may be reduced by the cash paid in determining the net unlike property received (boot).
On the other hand, if a taxpayer receives cash and also assumes a loan amount greater than that given up, the taxpayer may not reduce the amount of cash received by the increase in the loan burden. Therefore, the full amount of the cash received will be treated as unlike property (boot) in determining the amount of recognized gain.
It is clear that in order to avoid paying tax, boot must be eliminated. This is commonly done by offsetting boot given against boot received. However, all forms of boot may not be offset against each other. The following are some basic rules:
- Mortgage boot received can be offset against mortgage boot given.
- Cash and property boot given, can probably be offset against mortgage boot received and/or cash and property boot received.
- Cash boot received cannot be offset by mortgage boot given.
Note that one "gives" mortgage boot by assuming an existing mortgage and one "receives" mortgage boot by being relieved of the debt.
Q 13. What is an accommodator?
A An accommodator is a term used to indicate the person or corporation who facilitates the exchange. An accommodator has an active role in the execution of the exchange. In general, the accommodator helps with the transfer of title and holds the proceeds. The accommodator should be a party to the escrow, and possibly to the acquisition agreement, too. The taxpayer should enter into an "exchange agreement" (i.e., contract) with the accommodator specifying what the taxpayer requires the accommodator to accomplish and the timing of the accommodator's actions.
Q 14. Can the taxpayer's broker or attorney act as an accommodator for the taxpayer's exchange transaction?
A As a general rule, under the proposed regulations, a broker or attorney who handles only the Section 1031 transaction for an exchange party may act as an accommodator in the transaction without disqualifying the exchange. However, if the broker or attorney is closely allied or bears a relationship to or has represented the taxpayer more specifically (i.e., standing relationship as broker or attorney for the taxpayer on previous occasions) the broker or attorney will be considered a "related party" and this can disqualify the exchange. Instead, the party should select an expert who is a "qualified intermediary" and an "unrelated party," as defined in the regulations. Some attorneys, CPAs, title companies, or others may act as accommodators.
Q 15. What should a taxpayer look for in an accommodator?
A A taxpayer should look for a knowledge of real estate and tax law, and evidence that the accommodator is financially stable. questions a taxpayer should find answers to, so as to avoid problems later on, include:
- How experienced is this person?
- Is it a corporation or an individual?
- Is it adequately solvent?
- How comprehensive is the exchange agreement (contract)?
- Who wrote the contract?
- How is the fee determined?
- Are the parties protected?
- What assurance is there that the right party will be paid when it's all over?
- What prevents the accommodator from taking the money and running off to
- What if the accommodator files bankruptcy or becomes insolvent?
- Can the accommodator give you a list of references from other exchanges the accommodator was involved in?
Due to the fact that an accommodator is intricately involved in an exchange, a party should look for financial stability and experience when selecting an accommodator.
Q 16. What about the risk of bankruptcy or insolvency by the accommodator?
A The parties should structure the exchange so that their interest in the property and/or funds is locked in in the event of a bankruptcy, and that other creditors are prevented from affecting the validity of the transaction, such as by having a "perfected security interest" in the property and/or funds, under the Uniform Commercial Code. Other security arrangements are also possible.
If an accommodator files for bankruptcy within 90 days of an exchange, the Bankruptcy Court may be able to set aside the conveyance and reclaim the property as part of the accommodator's bankruptcy estate. If this happens, a party without a perfected security interest or other security arrangement risks losing everything, depending on what assets and liabilities the accommodator has during the bankruptcy.
Careful selection of an accommodator can minimize, although not entirely eliminate, the risk of bankruptcy or insolvency. Bankruptcy, and how to avoid its pitfalls, is a complicated area of the law. Questions should be referred to an attorney knowledgeable in this field concerning the consequences of the accommodator filing bankruptcy or becoming insolvent.
Q 17. May an exchange party receive interest on the funds placed with the accommodator?
A Pursuant to Treasury Regulation section 1.103(k)-1(g)(5) the answer is yes. The regulation provides a “safe harbor” stating that the determination of whether the taxpayer is in actual or constructive receipt of money or other property will be made without regard to whether the taxpayer is, or may be, entitled to receive any interest or growth factor as part of the deferred exchange. The safe harbor applies, however, only if the taxpayer’s rights to receive an interest or growth factor are expressly limited as stated in Treasury Regulation section 1.103(k)-1(g)(6). Taxpayers are encouraged to see their tax advisor regarding compliance with the regulations and other specific factors regarding receipt of interest in a 1031 tax deferred exchange .
Q 18. What types of property do not qualify for Section 1031 exchange treatment?
A Non-qualifying property includes cash, stocks, bonds or inventory. If these things make up part of the exchange, the remaining property in the exchange can still qualify for non-recognition treatment, but the non-qualifying property will not, since it is boot. (See Question 12.)
Real estate dealers may not exchange their real estate inventory under Section 1031.
In addition, qualifying property must be "like-kind." (See Question 11.)
Q 19. Is there a minimum holding period for the property received in an exchange?
A The law does not specify a particular holding period, except for exchanges between related parties. However, both the property given up and the property received must be held for productive use in a trade or business, or for investment, or for production of income. As a result, if the exchangor sells the property "soon," the IRS may determine that the property was not acquired for investment or business use, but actually for resale. If the IRS determines that the property was acquired for resale, then the benefits of Section 1031 would be lost, and full tax liability would most likely follow. A similar problem could occur if a rental house is acquired in an exchange and then "soon" converted into a personal residence of the exchangor. Two years is generally thought to be a safe period, but there are no specifics in the law.
If the exchange is between "related parties" (Internal Revenue Code Section 267(b)), and a property received from a related party is disposed of within two years after the transfer, any gain or loss that was deferred at the time of the original exchange will now be subject to tax as of the date it is transferred. An exception to this rule applies if the later transfer is due to the death of the related party, an involuntary conversion, or other circumstances which the IRS accepts as not done with the objective of tax avoidance.
Q 20. What is the effect of commissions and other transaction costs paid on the transfer in an exchange?
A Costs such as commissions, documentary transfer taxes, escrow fees and other transaction costs paid in connection with the transferred (downleg) property reduce the transaction proceeds, and therefore reduce the amount of current or future (deferred) taxable gain. Costs paid in connection with the acquired (upleg) property are added to the basis of that property.
The IRS has ruled that cash paid for transaction costs is to be treated as cash paid in the exchange transaction. Therefore, the IRS ruling allows any transaction cost paid in cash to reduce any cash received in the exchange in calculating the amount of unlike property received.
Q 21. How are losses handled in a Section 1031 exchange?
A There is no recognition of either loss or gain in a properly structured Section 1031 exchange. Both will be deferred until the property that is acquired is later disposed of in a taxable transaction. If the taxpayer receives unlike property together with like-kind property, gain will be currently recognized, however, no loss from the exchange is recognized.
If the taxpayer gives up unlike property together with like-kind property, loss is recognized to the extent that the adjusted basis of the unlike property (other than cash) transferred exceeds its fair market value.
The amount of loss not recognized is reflected in the increased basis of property acquired in the exchange because such property takes as its basis, the basis of the property that was given in the exchange.
Q 22. What is a "Starker" exchange?
A A "Starker" exchange is a Section 1031 exchange in which the transfer of the downleg and the acquisition of the upleg do not occur at the same time.
Starker v. United States which was decided in 1979, held that it was permissible to get the tax benefits of Section 1031 when the upleg property is acquired after the downleg is disposed of. The Starker case did not specify any time limits on completing the exchange. However, Congress later added time limits for identifying the upleg property and completing the exchange. These time limits are discussed in Question 3.
Q 23. What commissions will a real estate broker receive in an exchange?
A As with commissions in all types of transactions, this is a matter of contract between the broker and the party or parties who will be paying the commission. Commission obligations by one or more of the principals should specify, at a minimum, when commissions will be paid, how much, and to whom.
(Under
Q 24. Are tax-deferred exchanges permitted under
A Yes. The authority is found in Sections 18043 and 24941 of the California Revenue and Taxation Code which basically follows the federal law.
Q 25. Does this memorandum contain everything the reader needs to know about Section 1031 like-kind exchanges?
A No. This memorandum is not an exhaustive analysis of the law under Section 1031. This memorandum is intended to give the reader a basic overview of Section 1031 exchanges. This memorandum is not meant to be used in place of professional advice in any given situation. It is always recommended that the reader seek professional advice before entering into a Section 1031 exchange.
Q 26. Where can additional information be obtained?
A This memorandum is one of the many Legal Q&As, Legal Briefs, and other free legal publications made available to REALTORS® by C.A.R. For a complete listing of products and services available from C.A.R. visit C.A.R. Online at www.car.org .
Readers who require specific advice should review their facts with an attorney. C.A.R. members may speak with an attorney, free of charge, by contacting C.A.R.’s Member Legal Hotline at 213.739.8282, Monday through Friday, from 9:00 A.M. until 6:00 P.M., or via C.A.R. Online at www.car.org . C.A.R. members who are broker-owners, office managers, or Designated REALTORS® can receive priority access to the Member Legal Hotline by calling 213.739.8350 or via C.A.R. Online .
General correspondence can be addressed to legal_hotline@car.org or:
California Association of REALTORS®
Member Legal Services
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PLATINUM PROPERTIES JOINS UNIQUE GLOBAL ESTATES
6/22/2006
LAKEPORT—April 3, 2006—Platinum Properties, headed by Broker Associate Debra Sacco, has joined Unique Global Estates. This web based marketing company promotes homes of $1 million and above to targeted buyers at www.uniqueglobalestates.com. Unique Global Estates is the largest global database of luxury properties exclusively in excess of $1 million. “This company offers a database of over 25,000 targeted consumers,” said Sacco. “Marketing homes to targeted buyers that can afford them is our goal.” With the National Association of REALTORS® reporting that 3 out 4 home buyers begin their home search on the Internet, vast Internet marketing is necessary to sell a home.
Few buyers can afford a home in excess of $1 million, so the marketing of the home must go global in order to find the right buyer. Unique Global Estates has over 20,000 multi-million dollars homes listed in over 41 countries. “Marketing these distinctive homes means thinking outside the box of normal residential advertising,” said Sandra Auerbach, Marketing Director for Platinum Properties. “We need to reach a select group of buyers and that is what Unique Global Estates can do for us.”
Unique Global Estates advertises in the Wall Street Journal, Unique Homes Magazine, Ultimate Homes Magazine, The DuPont Registry and lore Magazine to attract high-end buyers to properties listed on their site. For more information on Unique Global Estates and marketing your home with Platinum Properties please contact Debra Sacco, Broker Associate, at 707-277-9255 ext 110.
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LAKE COUNTY'S BOUTIQUE SURPRISE
6/22/2006
Luxuriously updated hotel, new winery add luster to region
Christine Delsol, Chronicle Staff Writer
(06-18) 04:00 PDT Upper Lake, Lake County -- The last time I'd
encountered a shower that looked like some medieval instrument of torture --
but turned out to be quite the opposite -- it was a trendy, seven-nozzle
contraption in a Ritz-Carlton spa.
This one, with a Frisbee-sized shower head and horizontal pipes radiating
from the main spine to curve around my body like a giant alien's rib cage,
wasn't frightening so much as puzzling: What's a Ritz-Carlton shower doing
in a sleepy town in Lake County?
The Tallman Hotel, a freshly restored Old West hostelry in Upper Lake,
along with an innovative new winery just down the road, is going to do
serious damage to Lake County's reputation as a backwater.
Upper Lake is tucked off Highway 20, 5 miles from the northwest end of
Clear Lake, where fishing, water sports and funky, 1940s-style resorts draw
most of the county's tourists. The region has had a hard time shaking its
image as the realm of pear orchards, mobile homes and concerts by aging rock
stars at Konocti Harbor, despite a wine industry renaissance that is
bringing new hotels and resorts.
With a population of just over 1,000, Upper Lake is Lake County's oldest
settlement, and its two-block downtown has the covered sidewalks, wooden
facades and proliferation of antiques stores to prove it. Eminently
browsable Main Street is so uncrowded, even on weekends, that I felt a
little bit conspicuous poking around the shops.
This region is famous for some of California's hottest summers, and even
in May, the heat limited my walks around town to a couple of half-hour
forays. It was enough to get an impression of streets where pickups
outnumber SUVs and big clapboard houses with rose-covered porches hold their
own against mobile homes and newer construction.
After checking in at the Tallman, I flopped onto the king-size bed in my
roomy, second-story quarters to recover in air-conditioned comfort. The
hotel was built in 1895, and the renovation is faithful to the period yet
aggressively modern, from its hot tub and high-speed Internet connections to
its geothermal and solar energy systems. The Eastlake-style furniture,
carved headboard, chandelier, mosaic-tiled bathroom floor, antique fixtures
and gravity-flush toilets evoked Victorian style by way of the American West
-- graceful but not fussy.
The original hotel has four guest rooms. New garden rooms (patios with
Japanese soaking tubs on the ground floor; private balconies on the upper)
match the original hotel's rooms right down to the antique reproductions,
300 thread-count linens and imported Molton Brown bath products. Also new
are two cottage suites and a conference space.
My French doors led to a wraparound balcony with a table and chairs where
I read, snacked and watched people on the street below. Men in shorts leaned
against a pickup, sipping beer; families and clutches of women crossed the
street to the adjacent Blue Wing Saloon and Cafe, restored by the same
owners and now serving "California comfort food," local microbrews and
wines.
When the hotel was new, I would have been watching cowboys and
stagecoaches. Upper Lake Pioneer Rufus Tallman built the lodgings, saloon
and a livery stable in the late 1890s to serve tourists flocking to the
area's numerous mineral springs, spas and resorts. The Tallman's current
owners, San Franciscans Bernard and Lynne Butcher, worked from historic
photos to reconstruct the saloon, which is connected to the hotel by a shady
courtyard with a cool fountain. A local owner has restored the stable, now
home to an antique plumbing shop.
Upper Lake offers a wealth of simple pleasures, from the Mendocino
National Forest next door to the Robinson Rancheria Casino just down the
road. But smart money says the Tallman's chips are on wine touring.
This actually was California's largest grape-producing county before
1921, but it was slow to recover from Prohibition. Today, Lake County is one
of the state's fastest-growing wine regions. Its volcanic soil, hot days and
cool nights have given rise to four distinct appellations, two of them
approved just last year. Locals boast that wines here win more awards per
acre than any other region in the world.
The most interesting new winery is Ceago Del Lago on the north shore, 10
minutes from Upper Lake. Brainchild of Jim Fetzer, offspring of the Fetzer
Vineyards founders, it produces wines mostly from grapes grown elsewhere,
but it also grows some grapes at the lake.
More interesting still is the imposing, hacienda-style compound itself,
complete with sheep and chickens. Crossing the patio and walking through
acres of lavender to the pier, I half expected to see Zorro stalking through
a geranium-fringed doorway with Elena de la Vega on his arm. The estate is
also a demonstration garden of biodynamic growing methods, which not only
sustain but replenish the land.
I bought a bottle of clear, crisp Muscat made from Clear Lake grapes
before returning for a languid dinner of mushroom ravioli at the Blue Wing
Cafe. Depleted by heat, wine and a full stomach, I fell asleep while
watching the news and didn't face my shower until morning. Following the
instructions printed on a card hanging with my waffle-weave robe, I figured
out how to balance the water flow.
I used the overhead waterfall shower to soak down, shifted to a gentle
spray encircling me from shoulders to calves and then experimented with
gradations in between. I discovered so many ways to deliver warm water to
tight muscles that I was late for breakfast.
The hotel's staff was too kind to let me go hungry, but even on an empty
stomach, I'd have gone home satisfied.
If you go
Locations are in Upper Lake (Lake County) unless otherwise noted.
GETTING THERE
Upper Lake is about 5 miles from Clear Lake's northern shore, a 2
1/2-hour drive from San Francisco via Highway 29 through Napa Valley.
WHERE TO STAY
Tallman Hotel, 9550 Main St. (707) 275-2244,
Doubles
$159-$189 weekends, $139-$189 weeknights. Suites $219/$199.
Super 8 Motel, 450 E. Highway 20. (707) 275-0888,
$88-$109 weekends, $66-$77 weeknights; holidays higher. Basic but clean and
new.
WHERE TO EAT
Blue Wing Saloon, 9520 Main St. (707) 275-2233,
Lunch and dinner daily; beer and wine bar 11 a.m.-10 p.m. Lunch entrees
$6.25-$8.95, dinner $8.95-$17.95.
Blue Heron Cafe, 9475 Main St. (707) 275-9021. Mexican food, American
breakfasts and burgers, $4-$11.
WHAT TO DO
Ceago Del Lago, 5115 E. Highway 20, Nice. (707) 274-1462,
Tasting room, demonstration gardens, domestic and wild animals. 10 a.m.-5
p.m. daily.
Robinson Rancheria, 1545 E. Highway 20, Nice. (800) 809-3636,
Open 24 hours
FOR MORE INFORMATION
Lake County Visitor Information, (800) 525-3743, (707) 274-5652,
Lake County Wine Tours, (707) 998-4471,
E-mail Deputy Travel Editor Christine Delsol at travel@sfchronicle.com.
Copyright 2006 SF Chronicle
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SECOND-HOME MARKET SURGES, BIGGER THAN SHOWN IN EA
3/1/2006
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LAKEFRONT PROMENADE IN WORKS
2/24/2006
Lake County buying up properties for 2-mile glamorization of rundown area
By GLENDA ANDERSON
THE PRESS DEMOCRAT
Trailers, ramshackle cabins and empty buildings dot Highway 20 in and around Lucerne, fueling the town's reputation as one of Clear Lake's funky, low-budget resort and retirement communities.
But it's an area undergoing a metamorphosis.
County redevelopment officials have been buying up lakefront property, opening up the town's vistas and preparing to create a 2-mile public promenade with small parks, steps into the lake, a pier, shops and restaurants.
"It's the best thing that's ever happened here since the entire town was created," said Lucerne real estate agent Steve Merchen, who's lived in Lake County for 39 years.
With $2 million in grants and redevelopment funding, the county so far has purchased 795 feet of shoreline property, said Matt Perry, Lake County's chief deputy administrative officer.
The county already owned a park, a pier and a boat-docking area on the shoreline.
The promenade is part of the county's overall redevelopment plan, which stretches along the north shore of Clear Lake from Upper Lake to Clearlake Oaks.
The plan also calls for the eventual transformation of Lucerne's 13th Avenue, which runs perpendicular to the promenade, into a town square with shops, lodging and an amphitheater.
The promenade, featuring 14-foot-wide sidewalks and antique lampposts, is expected to ultimately stretch from First Avenue to 17th Avenue, nearly the entire length of the town.
Sections of the promenade could open in the next two years and be connected through additional land purchases over the following five years, said Lake County Supervisor Gary Lewis.
The promenade will be anchored at either end by hotels, restaurants and a harbor, he said.
Developers, including Fort Bragg hotelier Dominic Affinito, already have plans to either tear down or remodel existing structures at the promenade's ends, Lewis said.
And a Lake County physician has purchased land on the opposite side of Highway 20 from the lake with plans to build residential and retail facilities, he said.
Normally, redevelopment efforts take decades and Lake County's plan has a 40-year window, Lewis said.
But redevelopment efforts have been accelerated by rising land prices, he said. The redevelopment agency is funded by increases in property tax revenue.
Lewis said the agency's efforts also have been aided by the influx of wineries and other businesses.
They've been investing in the area, both because it's relatively affordable and because it has the potential to become a gentrified tourist destination.
Recent, nearby additions to the north shore include Ceago Del Lago, vintner Jim Fetzer's elegant $10 million hacienda-style winery; the $15 million Worldmark time-share vacation resort in Nice; and a $7.5 million expansion of the Robinson Rancheria Casino and Hotel.
At the westernmost end of the redevelopment zone in Upper Lake, a San Francisco couple recently completed the remodelings of a historic hotel and saloon.
For the environmentally minded, both the county and the state have plans to purchase farmland near Upper Lake and return it to wetlands, enhancing the already plentiful bird-watching opportunities around the 43,000-acre lake.
The lake is home to more than 300 species of birds, including egrets, herons, ospreys and pelicans.
The many changes along the upper end of the lake will entice people traveling on Highway 20 between the Sacramento Valley and the North Coast to stop for a while, Lewis said.
That's just what Chris Sorenson, owner of Lucerne Bath and Brush, a doggie hair salon, is hoping.
"They need to let the dogs out and get in the lake, then bring them here," he quipped.
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